Today's Market
by Dr Invest

Wuh? With the DOW JONES falling over 300 points, it is pretty clear how the economy feels about the continuation of the Obama presidency. We will be waiting for more responses, but so far many economists are wincing. Time will tell whether we are experiencing a real downturn or whether we will have the expected seasonal rally.

Here is today's returns on the EXPERIMENTAL $10K PORTFOLIO.

I have 1/3 of the total portfolio in BND and TIP, representing a BOND position. For caution's sake, we bought BND and TIP over a three month period. 10% of IAU, a gold ETF, was purchased as a hedge against Bernake's QE-3 buying program of $40 billion monthly. It is the belief that continued stimulus is equivelent to printing money and will devalue the dollar. The net result is that it will take more dollars to buy basic things. This means increased prices for food, rent, and gas. If you have your money in cash, the government will erode the value of what you hold. If Bernake inflates the dollar 20%, your present savings will buy 20% less. For example: You hold $100,000 in a interest bearing account at Hartford Bank. They pay you 1% annually, so you now hold $101,000 but the CONSUMER PRICE INDEX went up 10%. Groceries, rent, and gas all cost 10% than the previous year. You still hold $101,000 but its actual buying power is 10% less, so the actual VALUE of your $101,000 is only $91,000.

 

The actual value of the dollars you hold is being eroded by the ongoing printing policies of the FED. The average CPI hovers around 3% or less, but has risen into the double digits at various times in our history. Although our goverment has increased the money supply from time to time, there has never been the committment by the FED to the increasing of the money supply as we have today.

 

This is the major fear by economists, that the FED's keeping the interest rates at zero and years of increasing the money supply will result in uncontrolled inflation. A very contradictory term is STAGFLATION. Stagflation is where prices continue to climb, while economic growth remains low.

 

STOCKS

 

You will see that I purchased WMT (Walmart) in the above chart. The expectation is that WMT will rise in price over the Holiday Season. Having gained over 20% this year, WMT is a good candidate as an investment. WMT could return 6% to 8% by the end of 2012. On a day that the DOW lost 2.36% , a .86% loss in the value of WMT shows WMT's strength.

 

 

I have a STOP-BUY order for CATM set at $25.20. Should CATM show a real uptrend, it would hit the STOP-BUY and be purchased. I am also interested in DOL.TO and in the purchase of more gold in IAU. For now, I look for indications that the market will slide into a serious downtrend. My STOP-SELLS are in place to reduce my losses, but if my positions show gains, I will move the STOP-SELL just behind the closing price to maximize my returns. WMT has a STOP-SELL at 5% below the purchase price. Should WMT lose another 4.14%, I would smile and walk away. I am expecting an increase in WMT as Thanksgiving and Christmas loom on the horizon.

 

My gut feeling is that the real recession party will begin in 2013. My investment positions should improve as I remain in the market, but have already priced in my losses if the market continues downward. (If the market is indeed slipping into a deep recession, it will loose 20% or more. Even if I lose 5% on WMT now, I will repurchase WMT at a discounted price and regain the 5% lost plus a 15% to 20% gain.)

 

(note: the above information is for entertainment purposes only and not to be used as investment advice.)